INSTANT VIEW: Bernanke warns of systemic risk

NEW YORK (Reuters) - Restoring financial market stability is a top priority for the Federal Reserve as a weakening housing market, tighter credit and rising oil prices threaten the economy, Fed Chairman Ben Bernanke said on Tuesday.

Financial markets and institutions remain under "considerable stress," Bernanke said.

His comments come just two days after the Treasury Department, in close coordination with the Federal Reserve, announced measures to aid mortgage finance companies Fannie Mae and Freddie Mac, which have been under pressure as the housing market deteriorated.

In its semi-annual monetary policy report to Congress, the Fed raised its projection for growth in 2008 to a range of 1.0 percent to 1.6 percent from a 0.3 percent to 1.2 percent range it forecast in April on expectations for stronger consumer spending.

In the face of costlier energy, the U.S. central bank also raised its inflation forecast to a range of 3.8 percent to 4.2 percent, up substantially from its previous 3.1 percent to 3.4 percent projection.

COMMENTS:

SUBODH KUMAR, CHIEF INVESTMENT STRATEGIST, SUBODH KUMAR &

ASSOCIATES, TORONTO, CANADA:

"I think Bernanke has been realistic, but I think the issue is that the market expectations, including earnings and perhaps credit, have been somewhat unrealistic, so all the recalibration of the market has happened in a very short period.